Clients with large brokerage accounts may wish to exert control over how their accounts are managed. A client may provide instructions to the broker responsible for their account, setting out goals, guidelines, or even specific transactions the client wishes to make. This form of indirect account management may be efficient for the client, as they need only spend a minimal amount of time talking with their broker. The client may then rely on the broker and the broker's representatives to ensure transactions are carried out pursuant to the client's goals and guidelines. However, because the client is not directly involved in the transactions, it is harder for the client to ensure that the account is being managed in a manner consistent with whatever instructions, goals, and guidelines were given to the broker. The client may need to constantly monitor the account, and may not be able to prevent the broker from engaging in transactions that are counter to the client's goals. If the broker does act in a way that goes against the client's wishes, the client's primary recourse may be to find another broker, necessitating the moving of the entire account. Such a move may be very disruptive to the client's finances.
The client may also directly participate in managing the account, for example using the phone or online trading systems to complete transactions for their account. While directly managing the account may guarantee that the client's wishes are followed, direct management may be time consuming for the client. The client may be an individual with a job who does not have the necessary free time needed for the active management of an account, or a business that does not want to assign an employee to manage the account. Additionally, the client may have the account with the broker in part to take advantage of professional money management, a benefit which would be lost if the client does all of the account management.
For example, the client may want to have no more than 10% of the total assets in their account invested in US Government bonds. If the client chooses to directly manage their account, they may easily prevent any more than 10% of the account from being invested in US Government bonds, but at the expense of the time and energy needed to manage the entire account. The client may tell the broker of this restriction, but the client would not have any enforcement mechanism for the restriction. If the broker or the broker's representatives decided to invest 25% of the client's assets in US Government bonds, the client would not know the restriction had been violated until after the transaction was completed and the client checked the account statement and realized that 25% of the client's assets were now in US Government bonds. At that point, the client may choose to move the account to a different brokerage, possibly incurring losses of time and money.